Court of Appeals of Indiana | Memorandum Decision 10A04-1409-MF-450 | May 13, 2015 Page 1 of 14

MEMORANDUM DECISION

Pursuant to Ind. Appellate Rule 65(D), this 

Memorandum Decision shall not be regarded as 

precedent or cited before any court except for the 

purpose of establishing the defense of res judicata, 

collateral estoppel, or the law of the case.

ATTORNEYS FOR APPELLANTS

Eric C. Bohnet

Indianapolis, Indiana

Ninamary Buba Maginnis

Maginnis Law Office

Louisville, Kentucky

ATTORNEY FOR APPELLEE

Jason A. Lopp

Wyatt, Tarrant & Combs, LLP

New Albany, Indiana

I N T H E

COURT OF APPEALS OF INDIANA

Robert R. Setree, II, and Beverly 

L. Setree,

Appellants-Defendants,

v.

River City Bank,

Appellee-Plaintiff

May 13, 2015

Court of Appeals Case No. 10A04-

1409-MF-450

Appeal from the Clark Circuit Court

The Honorable Jerry Jacobi, Judge

The Honorable Kenneth R. Abbott, 

Magistrate

Case No. 10C02-1201-MF-68

Crone, Judge.

Case Summary

[1] Robert R. Setree, II, and Beverly L. Setree (“the Setrees”) executed three 

promissory notes secured by various mortgages to River City Bank (“Bank”). 
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Two of the mortgaged properties were in Indiana and two were in Kentucky. 

The Setrees breached the terms of one of the Indiana mortgages by failing to 

pay property taxes on the mortgaged property. Bank filed actions to foreclose 

on the Kentucky mortgages in Kentucky and was awarded the right to foreclose 

on both properties. Bank also filed an action in Indiana to foreclose on the 

property that the Setrees had failed to pay property taxes on. Setree v. River City 

Bank, 10 N.E.3d 30 (Ind. Ct. App. 2014), trans. denied (2015) (“Setree I”). In 

Setree I, another panel of this Court held that the issues raised in the Setrees’ 

challenge to Bank’s foreclosure had already been addressed in the Kentucky 

cases and therefore were barred by res judicata. Id. at 37. Finally, Bank sought

foreclosure of the Setrees’ property on Holly Drive in Jeffersonville, Indiana 

(“the Holly Drive Property”), the property in issue here. The trial court entered

a summary judgment order granting Bank the right to foreclose on the Holly 

Drive Property. The Setrees appeal, arguing that Bank does not have the right 

to foreclose on this property. Bank contends that the Kentucky foreclosure 

cases already decided the issues involved in the Setrees’ default in Bank’s favor, 

and therefore the Setrees’ challenge is barred by the doctrine of res judicata. 

We agree with Bank. We are also unpersuaded by the Setrees’ argument that 

foreclosure of the Holly Drive Property is an unconscionable remedy. 

Accordingly, we affirm the summary judgment order.

Facts and Procedural History

[2] At all times relevant to this appeal, the Setrees owned the Holly Drive Property.

In 2005, the Setrees executed a promissory note (“2005 Note”) in favor of Bank 
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for $45,667 plus interest, which they secured with a mortgage in favor of Bank 

on the Holly Drive Property. In 2006, the Setrees executed a second

promissory note (“2006 Note”) in favor of Bank for $15,484.19 plus interest, 

secured by a second mortgage on the Holly Drive Property (we refer to the first 

and second mortgages collectively as “the Holly Drive Mortgages”). In 2007, 

the Setrees executed a third promissory note (“2007 Note”) in favor of Bank for 

$91,380.50 plus interest and secured it with a mortgage in favor of Bank on 

property on Cardinal Lane, Jeffersonville (“the Cardinal Lane Mortgage”). The 

provisions regarding events of default and right to cure in the Holly Drive 

Mortgages are identical to the corresponding provisions in the Cardinal Lane 

Mortgage. 

[3] Subsequently, the Setrees executed two additional mortgages in favor of Bank 

on their Louisville, Kentucky properties, one on Virginia Avenue and one on

Roederer Drive (“the Virginia Avenue Mortgage” and “the Roederer Drive 

Mortgage”). These two mortgages provided further security for the 2005 and 

2006 Notes. The Roederer Drive Mortgage provided further security for the 

2007 Note. In sum, the 2005 and 2006 Notes were secured by mortgages on the 

Holly Drive, Virginia Avenue, and Roederer Drive Properties, and the 2007 

Note was secured by mortgages on the Cardinal Lane and Roederer Drive

Properties.

[4] Relevant to this appeal, all three Notes contain the same provisions. Each Note 

contains a cross-default clause, which provides that the “[f]ailure to make any 

payment when due under this Note or any Note payable to [Bank]” constitutes 
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a default. Appellants’ App. at 18, 29; Appellee’s App. at 106. Each Note 

provides that the “[v]iolation of any covenant of this note or any note payable 

to [Bank]” constitutes an event of default. Appellants’ App. at 18, 29; 

Appellee’s App. at 106. All three Notes also contain an acceleration clause, 

which provides, “Upon occurrence of any event of default under the 

Agreement, all of the indebtedness shall immediately become due and payable 

without any notice or demand by [Bank].” Appellants’ App. at 18, 29;

Appellee’s App. at 106. 

[5] In 2009 and 2010, the Setrees failed to pay Indiana real estate taxes on the 

Cardinal Lane Property. This constituted a default under the 2007 Note. 

Pursuant to the cross-default clauses in the Notes, the default under the 2007 

Note constituted a default of the 2005 and 2006 Notes and activated Bank’s

right to accelerate all debts due and owing under all three Notes and to 

foreclose on all of the mortgages it held on the Setrees’ properties. Appellee’s 

App. at 106; Setree I, 10 N.E.3d at 32. In the fall of 2010, the Cardinal Lane 

Property was sold at a tax sale due to the Setrees’ failure to pay taxes. The 

Setrees and Bank attempted to resolve this problem. However, by the end of 

September 2011, the Setrees had not paid the delinquent taxes. On September 

29, 2011, Bank paid $9455.73 to redeem the Cardinal Lane Property from the 

tax sale buyer and an additional $3116.55 in taxes to bring the delinquent real 

estate taxes current. The tax redemption amount and all other outstanding 

taxes had to be paid by October 3, 2011, or Bank would have lost its mortgage 

lien against the Cardinal Lane Property. See Ind. Code § 6-1.1-25-4 (providing 
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that redemption period for real property sold for delinquent taxes is one year 

after date of sale).

[6] In October 2011, the Setrees wrote a letter to Bank stating as follows: 

We know these taxes are our responsibility. We notified River City 

Bank more than a year ago to let you know we didn’t have the means 

to pay them because they had increased so much. We asked if you 

could pay them.

Appellants’ App. at 38.

[7] Bank initiated foreclosure actions on its four mortgages. The Kentucky cases 

proceeded first. In September 2012, the Jefferson Circuit Court entered a final 

judgment and order of sale in favor of Bank on the Roederer Drive property, 

which had secured the 2007 Note. In January 2013, it issued a similar order in 

favor of Bank on the Virginia Avenue property, which had secured the 2005 

and 2006 Notes. The January 2013 order concluded that the Setrees failed to 

pay property tax on the Cardinal Lane Property, that their failure to pay 

property taxes constituted a default on the 2007 Note, and that pursuant to the 

cross-default clauses, default under the 2007 Note constituted a default on all

notes payable to Bank. Appellants’ App. at 60-61; Setree I, 10 N.E.3d at 33. In 

addition, the January 2013 order rejected the Setrees’ contention that they were 

not provided notice or an opportunity to cure. The January 2013 order

concluded that the Setrees admitted in their October 2011 letter that they were 

given more than one year to cure the default, and therefore they had notice and 
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an opportunity to cure the default but failed to do so. Appellants’ App. at 60-

61; Setree I, 10 N.E.3d at 33. 

[8] The Indiana cases followed. In October 2013, the Clark Circuit Court issued 

summary judgment in favor of Bank granting it the right to foreclose on the

Cardinal Lane Property. The Setrees appealed. In May 2014, another panel of 

this Court affirmed summary judgment in favor of Bank, holding that (1) we

were required to afford full faith and credit to the Kentucky foreclosure

judgments and (2) because those judgments considered the same issues as those 

the Setrees raised to challenge Bank’s right to foreclose on the Cardinal Lane 

Property, res judicata prevented relitigation of the Setrees’ default. Setree I, 10 

N.E.3d at 36, 37.

[9] As for the Holly Drive Property, in September 2014, the trial court granted 

summary judgment in favor of Bank and ordered foreclosure and sale of the 

property. The Setrees appeal.

Discussion and Decision

Standard of Review

[10] When reviewing a grant of summary judgment, our standard of review 

is the same as that of the trial court. Considering only those facts that 

the parties designated to the trial court, we must determine whether 

there is a “genuine issue as to any material fact” and whether “the 

moving party is entitled to a judgment as a matter of law.” Ind. Trial 

Rule 56(C). In answering these questions, the reviewing court 

construes all factual inferences in the non-moving party’s favor and 

resolves all doubts as to the existence of a material issue against the 

moving party. The moving party bears the burden of making a prima 

facie showing that there are no genuine issues of material fact and that 
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the movant is entitled to judgment as a matter of law; and once the 

movant satisfies the burden, the burden then shifts to the non-moving 

party to designate and produce evidence of facts showing the existence 

of a genuine issue of material fact.

Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267, 1270 (Ind. 2009) 

(citations omitted).

Section 1 - The Setrees’ challenge to Bank’s foreclosure of the 

Holly Drive Property is barred by res judicata.

[11] The Setrees argue that the trial court erred in granting summary judgment in 

favor of Bank because (1) a breach of the Cardinal Lane Mortgage is not a 

breach of the Holly Drive Mortgages and (2) even if they are in default under

the Holly Drive Mortgages, the Holly Drive Mortgages require Bank to provide 

notice and an opportunity to cure and it has not done so. Bank contends that 

the Kentucky foreclosure cases already decided issues relating to the Setrees’

default in Bank’s favor, and therefore the Setrees’ arguments are barred by the 

doctrine of res judicata. We agree with Bank.

[12] In Setree I, another panel of this Court considered whether the Setrees’ challenge 

to Bank’s right to foreclose on the Cardinal Lane Property was barred by res 

judicata. We noted that “[t]he effect Indiana must accord the Kentucky 

judgments depends on the treatment that judgment would receive in 

Kentucky.” 10 N.E.3d at 36. We explained, 

Pursuant to Kentucky precedents, res judicata prevents the relitigation 

of the same issues in a subsequent appeal. Miller v. Administrative Office 

of Courts, 361 S.W.3d 867, 871 (Ky. 2011), reh’g denied. Three elements 
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must be met for res judicata, or claim preclusion, to apply: (1) there 

must be an identity of the parties between the two actions; (2) there 

must be an identity of the two causes of action; and (3) the prior action 

must have been decided on the merits. Id. at 872. A close cousin to 

the doctrine of res judicata is the theory of collateral estoppel, or issue 

preclusion. Id. In order for issue preclusion to operate as a bar to 

further litigation, certain elements must be established: (1) at least one 

party to be bound in the second case must have been a party in the first 

case; (2) the issue in the second case must be the same as the issue in 

the first case; (3) the issue must have been actually litigated; (4) the 

issue was actually decided in that action; and (5) the decision on the 

issue in the prior action must have been necessary to the court’s 

judgment and adverse to the party to be bound. Id. Res judicata, 

being the older term, is thought of as an umbrella doctrine that 

contains within it both claim and issue preclusion. Id. at 871. A 

pending appeal does not affect the finality of a judgment for preclusion 

purposes. See Stemler v. City of Florence, 126 F.3d 856, 871 (6th Cir.

1997); Roberts v. Wilcox, 805 S.W.2d 152, 153 (Ky. Ct. App. 1991).

Id. 

[13] The Setree I court concluded that the Setrees’ challenge to Bank’s right to 

foreclose on the Cardinal Lane Property was barred by res judicata, specifically 

issue preclusion. Id. at 37. We reasoned as follows:

The same issues–the Setrees’ failure to pay Indiana property tax 

pursuant to their 2007 Note and their right to cure–between the same 

parties–the Setrees and [Bank]–governed the Kentucky cases and this 

appeal. [Bank’s] right to foreclose on all three notes was triggered as a result of 

the Setrees’ failure to pay their Indiana taxes on the Cardinal Lane Property.

Because of cross-default provisions in the three notes executed between 

the Setrees and [Bank], the Setrees’ default under the 2007 Note 

constituted a default under the previously executed two notes as well. 

Therefore, the Kentucky courts’ decisions to grant [Bank] the right to 

foreclose on the Setrees’ Kentucky properties necessarily included a 

determination of default under the 2007 Note–the issue before the trial 

court. Moreover, the order issued by the Jefferson Circuit Court on 
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January 15, 2013, analyzed the Setrees’ right to cure under the note, an 

identical claim made by the Setrees in the current case, as being 

without merit. Accordingly, although the Kentucky cases concerned 

different mortgages and different property than the instant cause, they 

litigated the same issues between the same parties: the Setrees’ failure 

to pay the Indiana taxes on the Cardinal Lane Property and the 

Setrees’ right to cure its failure under the 2007 Note.

Id. (emphasis added).

[14] The Setrees contend that although Setree I concluded that the Kentucky cases 

decided the issues relevant to the breach of the Cardinal Lane Mortgage and the 

2007 Note, the breach of the Cardinal Lane Mortgage has no relationship to the 

Holly Drive Mortgages, and thus the Kentucky cases did not address issues 

related to the Holly Drive Mortgages. Although the Holly Drive Mortgages 

were not directly involved in the Kentucky cases, we nevertheless conclude that 

the Setrees’ challenge to Bank’s right to foreclose on the Holly Drive Property is

barred by issue preclusion. We do so for two reasons.

[15] First, we are unpersuaded by the Setrees’ argument that the breach of the 

Cardinal Lane Mortgage has no relationship to the Holly Drive Mortgages. 

They emphasize that the Cardinal Lane Mortgage secured only the 2007 Note, 

while the Holly Drive Mortgages secured the 2005 and 2006 Notes. This 

distinction is immaterial. As the Setree I court observed, the Kentucky cases 

concluded that based on the cross-default provisions in the 2005, 2006, and 

2007 Notes, the Setrees’ default under the 2007 Note constituted a default 

under the 2005 and 2006 Notes. Significantly, the Setrees do not dispute that 

they are in default of the 2005 and 2006 Notes. Further, the Setrees 
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conveniently ignore that one of the Kentucky foreclosure cases was based on 

the Virginia Property Mortgage, which, like the Holly Drive Mortgages, 

secured the 2005 and 2006 Notes and not the 2007 Note. 

[16] The Setrees’ argument also disregards relevant language in the Holly Drive

Mortgages. Before examining this language, we observe,

Interpretation and construction of contracts are questions of law. In 

reviewing questions of contract interpretation and construction upon 

appeal, we read the contract as a whole when trying to ascertain the 

parties’ intent, and we will make all attempts to construe the language 

in a contract so as not to render any words, phrases, or terms 

ineffective or meaningless. Further, we must accept an interpretation 

of the contract that harmonizes its provisions, as opposed to one that 

causes the provisions to conflict. 

Fischer v. Heymann, 943 N.E.2d 896, 900-01 (Ind. Ct. App. 2011) (citations and 

quotation marks omitted).

[17] Under the section labeled “Events of Default” The Holly Drive Mortgages 

provide that, at Bank’s option, an event of default includes the following:

Other Defaults. [The Setrees fail] to comply with or to perform any 

other term, obligation, covenant, or condition contained in the 

Mortgage or in any of the Related Documents or to comply with or to 

perform any term, obligation, covenant or condition contained in any 

other agreement between [Bank] and [the Setrees].

....

Breach of Other Agreement. Any breach by [the Setrees] under the 

terms of any other agreement between [the Setrees] and [Bank] that is not 

remedied within any grace period provided therein, including without 

limitation any agreement concerning any indebtedness or other 

obligation of [the Setrees] to [Bank], whether existing now or later.
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....

Right to Cure. If such failure is curable and if [the Setrees have] not 

given a notice of a breach of the same provision of this Mortgage 

within the preceding twelve (12) months, it may be cured (and no 

Event of Default will have occurred) if [the Setrees], after [Bank] sends 

written notice demanding cure of such failure: (a) cures the failure 

within twenty (20) days; or (b) if the cure requires more than twenty 

(20) days, immediately initiates steps sufficient to cure the failure and 

thereafter continues and completes all reasonable and necessary steps 

sufficient to produce compliance as soon as reasonably practical.

Appellants’ App. at 22-23, 32-33; Appellee’s App. at 110-11 (emphases added).

[18] The Setrees argue that the cross-default clause in the Holly Drive Mortgages

does not include unrelated agreements and that the Cardinal Lane Mortgage is 

unrelated to the Holly Drive Mortgages. They assert that the phrase “any other 

agreement” as used in the “Other Defaults” clause cannot apply to mortgages 

which were executed later or otherwise have no connection to the Holly Drive 

Property. However, the Setrees focus only on the latter part of that sentence. 

They completely ignore the first part, which refers to the failure “to comply 

with or to perform any term ... in the Mortgage or in any of the Related 

Documents.” Id. If the failure to comply with the mortgage itself and any 

related documents is an event of default, then “any other agreement” must refer 

to agreements between the parties that are unrelated, including the Cardinal 

Lane Mortgage. Therefore, we conclude that the Kentucky court’s 

determination that a breach of the Cardinal Lane Mortgage constituted a 

default of all three notes and gave Bank right to foreclosure on all its mortgages 

includes the Holly Drive Mortgages.
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[19] Second, the Kentucky cases have decided the issue of notice and opportunity to 

cure. By its own terms, the Holly Drive Mortgages do not provide the Setrees 

with an additional layer for notice and an opportunity to cure above that 

provided in the Cardinal Lane Mortgage. In the “Breach of Other Agreement” 

clause, the Holly Drive Mortgages state, “Any breach by [the Setrees] under the 

terms of any other agreement between [the Setrees] and [Bank] that is not 

remedied within any grace period provided therein, including without limitation 

any agreement concerning any indebtedness or other obligation of [the Setrees] 

to [Bank], whether existing now or later” constitutes, at Bank’s option, an event 

of default. Id. at 23, 33 (emphases added). Thus, in the event of the Setrees’

breach of another agreement, the Holly Drive Mortgages provide the Setrees 

with the opportunity to remedy that breach as provided for in the agreement 

that they breached. Here, the Setrees breached the Cardinal Lane Mortgage by 

failing to pay property taxes on it. They knew that the failure to pay the taxes 

was a breach and were given nearly a year to remedy the breach. No additional

notice and opportunity to cure are provided under the Holly Drive Mortgages. 

As a practical matter, we fail to see how the Setrees could have cured this 

particular default under the Holly Drive Mortgages when they failed to pay the 

delinquent taxes and cure their default under the Cardinal Lane Mortgage. The

Setree I court concluded that the issue of notice and opportunity to cure under 

the Cardinal Lane Mortgage had already been decided by the Kentucky cases. 

There is no other issue to explore here. We conclude that the Setrees’ challenge 

to the foreclosure of the Holly Drive Property is barred by issue preclusion.
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Section 2 – Foreclosure of the Holly Drive Property is not an 

unconscionable remedy.

[20] The Setrees also argue that foreclosure is an unconscionable remedy. We 

observe,

When a party can show that the contract, which is sought to be 

enforced, was in fact an unconscionable one, due to a prodigious 

amount of bargaining power on behalf of the stronger party, which is 

used to the stronger party’s advantage and is unknown to the lesser

party, causing a great hardship and risk on the lesser party, the 

contract provision, or the contract as a whole, if the provision is not 

separable, should not be enforceable on the grounds that the provision 

is contrary to public policy. 

Weaver v. Am. Oil Co., 257 Ind. 458, 464, 276 N.E.2d 144, 148 (1971).

[21] The Setrees argue that the judgments Bank received on the Cardinal Lane, 

Roederer Drive, and Virginia Avenue Properties far exceed their delinquent 

taxes of $3116.55, which provided the basis for the foreclosures. Such a

comparison is misplaced and inconsequential. The amount recovered by Bank 

is relevant to the amount of the Setrees’ indebtedness. More importantly, the 

Setrees have made no showing that Bank used a prodigious amount of 

bargaining power to impose a contractual provision that was unknown to them

and placed great hardship and risk upon them. We are unpersuaded by the 

Setrees’ argument that foreclosure of the Holly Drive Property is 

unconscionable.

[22] Based on the foregoing, we affirm the summary judgment order granting 

foreclosure and sale of the Holly Drive Property.
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[23] Affirmed.

Brown, J., and Pyle, J., concur.